Tax ratings

Six-country study reveals the UK's tax regime is ‘less fair, less transparent, and lacks trust'.

The UK's tax system is viewed as less fair and less transparent than other tax regimes around the world, according to an international study of finance professionals by ACCA.

Called Perspectives on Fair Tax, the report surveyed ACCA members in Australia, Canada, Hong Kong, Singapore, the UK, and the US, gauging opinions on tax fairness, complexity, transparency, and how well tax authorities communicate with their citizens.

Members in Singapore and Hong Kong had a positive view of their tax system, believing it to be fair and simple, while the UK, Australia, and Canada said that their regimes were 'less fair' and 'somewhat complex'. Respondents from the US believe their tax system was 'relatively complex'.

Professor Francis Chittenden, ACCA professor of small business finance at Manchester Business School, who wrote the report with colleague Hilary Foster, said: 'The message from our research is for governments to reduce the volume of laws, directives, and regulations that contributes most to complexity. There is a fundamental issue for governments around the world to decide the purpose and structure of tax systems, and importantly to communicate the rationale behind these decisions.'
Quizzed on whether their country's tax regime was transparent, respondents from the UK rated it as the least transparent, while yet again Hong Kong and Singapore claimed their system to have the most transparency.

UK respondents also said there are too many taxes in the UK which adds to tax complexity. Specific areas marked as unfair included: 

• the increasing role of employers acting as tax collecting agents for the government
• retrospective changes to the tax system 
• stealth taxes - such as the failure to index link thresholds and allowances 
• the assumption of additional powers by HM Revenue & Customs (HMRC).

The results also showed an overwhelming belief in all countries that it is the volume of directives, laws, and regulations that has the greatest effect on tax complexity. Because of this, all countries agreed that reducing complexity in the tax system would lead to a reduction in the level of tax avoidance and tax evasion.

When asked how well their country's tax authorities communicated with citizens, Hong Kong and Singapore agreed that compliance requirements are clearly communicated, while the UK had the opposite view. Respondents said that lack of clarity, increasing complexity, and a seemingly aggressive stance by HMRC was breaking an already fragile trust.

Chas Roy-Chowdhury, head of taxation at ACCA, added: 'The report's findings also show that tax systems lag behind the economic cycle, that it simply can't keep up with the pace of change. Governments should explore the creation of flexibility in the tax structure to allow for a swift response to changing economic conditions.'

The report's conclusion states that trust is crucial for a tax system to work in any country - that government should create an environment in which citizens believe they have played a part in setting the system and that the system treats them with respect. In this way, more taxpayers will feel inclined to comply, reducing evasion and associated administrative costs.